Gubernatorial race rests on economy

As Gov. Dannel Malloy formally enters the fray as a candidate in this November’s gubernatorial race, both his supporters and detractors will attempt to use the state’s recent economic activity to measure his time in office.

In recent months, Malloy has continually stressed that the state’s economy is headed on an upward trend. In an effort to build the economy, this Wednesday, the Governor and the Connecticut Department of Agriculture Commissioner Steven Reviczky announced an agreement that will allow the State to use more than $8 million in federal funds to boost agricultural production. Still, Republicans have pointed to the state’s sluggish economic growth overall – Connecticut had the slowest growth rate of all states in 2013 – as evidence that Malloy’s economic policies have fallen short.

“In the last three years, the private sector has grown more than 40,000 private sector jobs, the state’s long-term debt has been reduced by more than $11.5 billion, and the state budget went from a $3.6 billion deficit to a $500 million surplus,” the Governor said in a statement in March. “These are all signs of progress, however there is still more work to do.”

Several Democratic state representatives have pointed to this reduction in the budget deficit as one of Malloy’s key economic policy victories.

According to the State Comptroller’s Office, Malloy plans to invest $250 million in the Rainy Day Fund, an additional $100 million payment to state employee pensions, and $155 million in $55 tax refunds to 2.7 million taxpayers.

“The economy is improving,” said State Sen. Martin Looney, the Democratic Majority Leader. “We have been in a relatively slow recovery from the deep recession, but there are signs of improvement. And a good deal of those signs are signs of the Governor’s leadership.”

But Connecticut still ranks low compared with other states in terms of economic development and business growth due to high corporate taxation, according to Gary Rose, a politics expert at Sacred Heart University.

Malloy’s first year in office included a tax increase that experts have pegged at about $1.5 billion total, which Rose said has negatively impacted consumer spending.
“Connecticut’s economy is in terrible shape,” said Sen. Toni Boucher, a Republican and former candidate in the 2014 governor’s race, pointing to what she deemed an over-dependence on the investment sector.

“We need a more diversified economy. We need to increase the opportunity for growth and make this a more conducive environment for businesses to prosper.”

Boucher critiqued the Governor’s actions toward businesses, claiming that the Governor’s aggressive tax increases in the past several years have led to a shrinkage in the labor force as people move out of Connecticut to states with lower taxes.

She said the tax system should be adjusted to help businesses rather than giving out “little carve-outs,” referencing the Governor’s recent $55-per-person tax refund and tax cuts for retired teachers that many deemed a political gimmick on the part of the governor to bolster his re-election.

But Fred Carstensen, an economist at the University of Connecticut, said Connecticut’s taxes were not very large in comparison to the rest of the country and awarded the Governor a “B+” in his economic initiatives.

“[The Governor] has been deeply engaged in trying to meet the challenge of revitalizing the state’s economy,” Carstensen said, adding that changes still needed to be made in the areas of transportation infrastructure and information technology.

The governor’s programs to help small businesses that were passed in the last few years, including state grants to small businesses to expand and hire people who were previously unemployed are now bearing fruit and stimulating employment, Looney said.

The Governor received huge support from state unions after enacting the nation’s highest minimum wage at $10.10, including Council 4 AFSCME, a union representing 32,000 state and local government employees.

“He has shown a real commitment to making sure Connecticut is a good place for working people,” said Larry Dorman, a spokesman for AFSCME.

But Rose said Malloy’s commitment to the public sector, which he said stems from the prominent place of public employee unions in the governor’s constituency base, hurts the private sector.

Looking forward to the midterm election, Rose said the economy will play a “huge” role in the election cycle, as Tom Foley, one of the projected Republican candidates, is “neck and neck with Malloy.”

“This is going to be a pocketbook election – economic issues will drive voting behavior,” Rose said, adding that jobs and taxes specifically will be major factors.

While Malloy does have support from unions, Rose said that Foley could gain support for his economic policies. Foley has advocated for a line-by-line examination of every state expenditure, and he wants a more friendly business environment by specifically reducing corporate tax rates.